The 1.5-degree target of the Paris climate agreement was exceeded for the first time in 2024. Technological proceedings for the direct capture of CO2 are gaining more and more attention. Carbon capture technologies are arousing the interest of institutional investors.
With the Paris climate agreement’s 1.5-degree target being exceeded for the first time in 2024, action to reduce emissions is more important than ever. Carbon capture technologies, which capture and store carbon dioxide (CO2) from the atmosphere or recycle it, could make an important contribution. These technologies are the focus of the FERI Cognitive Finance Institute’s new analysis, «Carbon Capture: Decarbonizing Carbon Capture». The Bad Homburg think tank examines both the technical bases and the possible effects of different carbon capture approaches. The analysis takes a close look at the main players around the world and examines the opportunities and risks – including for entrepreneurs and investors.
Increased focus on CO2 extraction from the atmosphere
Although reducing greenhouse gases plays a key role in combating climate change, the analysis argues that a reversal in emissions of the greenhouse gas CO2, the main cause of global warming, is not yet in sight. As a result, targeted measures to remove CO2 from the atmosphere have become increasingly important. In addition to natural methods such as afforestation and reforestation, technological carbon capture processes would gain in importance in order to capture, capture and store CO2 from the atmosphere (carbon capture and storage, CCS) or recycle it (carbon capture and utilization, CCU).
Technology is very research-intensive and not a substitute for the precautionary principle
Until now, carbon capture technologies have only been permitted for research and testing purposes. «Without large-scale removal of carbon dioxide from the atmosphere, according to the Intergovernmental Panel on Climate Change (IPCC), it is impossible to meet the temperature targets of the 2015 Paris Climate Agreement», says Dr. Heinz-Werner Rapp, founder and head of the FERI Cognitive Finance Institute. Consequently, the technology is recognized worldwide as an important component in the fight against climate change.
Carbon capture technologies are still extremely capital- and energy-intensive
Targeted technologies for carbon capture are currently extremely capital- and energy-intensive, and «even the amounts of CO2 captured and stored are more like a drop in a hot stone», according to the analysis. Moreover, there is still a lack of an efficient infrastructure to reliably transport captured CO2. Safety and environmental issues, such as the storage of greenhouse gases in underground rock storage facilities, pose further challenges, as do rapidly changing national climate targets. As the example of the United States shows, changes in government in the future could lead to a significant change in framework conditions and to the abolition or reduction of existing subsidy programs.
Avoiding greenhouse emissions remains the main guiding principle
For this reason, too, carbon capture should not be seen as a panacea and should not absolve politicians and business from their responsibilities: «In view of the challenges and risks for almost all technologies in the area of carbon capture, in the sense of the precautionary principle, the avoidance of greenhouse emissions should continue to be the top guiding principle for a sustainable climate protection policy», says Rapp. According to Rapp, how carbon capture technologies will prevail in the future and what role they will ultimately play in combating climate change also depends heavily on the political and regulatory framework conditions: «The next few years will be decisive in order to scale carbon capture technologies on a large scale and make them significantly more cost-effective.» However, if the right course is taken, a future carbon capture market offers extremely attractive growth opportunities.
Investor interest in carbon capture technologies is growing
According to Rapp, this is precisely why institutional investors are already showing increased interest in carbon capture projects – both through natural methods and through technological proceedings such as CCU or CCS. The drivers are both intrinsic motives – such as the claim to make a contribution to climate protection – and the ability to generate attractive financial returns from suitable projects. «Entrepreneurs and investors should consider the opportunities and risks of carbon capture technology as part of a holistic analysis. Parameters such as technological progress, technological maturity and cost-effectiveness of individual approaches, as well as their fundamental usefulness in the fight against global climate change, are of key importance», says Rapp.
